The deal between United Spirits Ltd (USL) and Diageo Plc suffered a big blow on Friday, with the Division Bench of the Karnataka High Court setting aside the permission granted by a single judge bench to UB Holdings Ltd (UBHL), the holding company of the UB Group, for selling its shares to the British liquor giant.

Observing that the price of the share was more speculative and not true value, the Bench said: “The price quoted at NSE on the date of share purchase agreement, November 9, 2012, is a factor which should be taken note of at the time of valuation of share and it is not decisive and conclusive. In a transaction of this nature, valuation by an approved valuer should have been insisted upon.”

Ignored

The Bench also said the single judge, though was aware that State Bank of India, and Jammu and Kashmir Bank had held 26.46 lakh shares of USL mortgaged to them by UBHL, did not hear them prior to granting permission for sale of shares. “Even before winding up, if the company court has to pass an order approving and validating an alienation it is obligatory on the part of the court that all these creditors have been heard… Hearing one creditor is not sufficient, as in law any alienation made after the presentation of winding up petition is void," the Bench said.

Kept in dark

The Bench also found that UBHL at the time of filling application seeking permission to sell shares did not disclose the fact that it had dues of Rs 6,493 crore to 14 banks and it had also undertaken to the banks that it would not sell any property or assets without the permission from the lenders.

Deposit in court

Meanwhile, the Bench directed UBHL to deposit the remaining Rs 394.50 crore from the total Rs 1,460 crore received from the sale of these shares to Diageo with the High Court within a week from receipt of copy of this order.